Friday, March 10, 2017

Cahya Mata Sarawak : The jewel of Sarawak BUY (Amended Copy)

Cahya Mata Sarawak : The jewel of
Sarawak BUY (Amended Copy)

The jewel of Sarawak conglomerates, Cahya Mata Sarawak
(CMS), focuses in a wide range of businesses such as cement, construction
materials and trading, construction and road maintenance, ICT, property
development and strategic investments. CMS is one of the key local participants
of SCORE development projects and the Pan-Borneo Highway project, in addition
to its existing businesses with the state government. CMS will continue to
achieve stellar growth driven by the following:

1. As Sarawak’s sole producer of cement and leading
construction materials supplier,. CMS has an entrenched position in supply of
building materials; 2. Steady recurring income from road maintenance in the
state through road maintenance concessionaires; 3. Owns undervalued land banks
which have the potential for property development or can be sold for a hefty
premium over the book cost; 4. Active involvement in energy-intensive projects
and holds a substantial stake in OM Materials and Malaysia Phosphate Additives
Sarawak which reflects good prospects in the long run; 5. Robust dividend
payout to investors. CMS continues to reward its investors with a dividend
payout ratio of at least 40% for FY16 as outlined in their CMS dividend payout
policy.

We project FY17 earnings to grow by 39% underpinned by: 1)
Increasing demand in cement and building materials contributed by mega
infrastructure projects; 2) Steady growth of construction androad maintenance
works due to the recent Pan-Borneo Highway project awarded to CMS (JV with Bina
Puri Holdings); and 3) Stable demand from its property development both
in Kuching and Samalaju, rising occupancy in Samalaju lodges and potential land
sale of its current undervalued land banks. We initiate CMS with a BUY call
with an SOP-based FV of RM5.15.